The pastor of a tiny Iowa church admits to having thought about suicide over his debts. According to an NPR interview, he’ll be paying on his student loan until 2029. And, he’s not alone.
The human toll of the nation’s shaky loan industry has yet to be measured, but social workers and family counseling experts say family financial problems are leading to divorce, spousal and child abuse, even suicide. Over a single month period this year, the federal government filed at least 25 lawsuits against students who had allegedly defaulted on their student loans. This does not include the farm foreclosures, or federal lawsuits over defaulted home mortgages in various federally subsidized home mortgage programs.
Today’s young adults often begin their college careers with a crippling amount of debt. Take for example, the below mentioned student who is carrying more debt as a teenage student than many long-time married, financially stable married couples of a generation ago:
Tom Dillon, 19, a pre-pharmacy major at the University of Connecticut, is carrying $52,000 in student loans. And he's just getting started. When he gets his pharmacy doctorate in four years, he expects his debt to exceed $150,000. (USA TODAY 2-22-06)
Thousands of students are burdened by onerous student loans before they receive their degree and cash their first paycheck. The situation has created an entire after market of debt consolidators, counselors and refinancing services, but the trickle down effect of the national economic crisis puts many of these companies at risk as well. Referring to the stock slide of one such company, the Houston Chronicle says the situation is more critical than people think:
First Marblehead Corp.'s stock sank Monday after a Friedman Billings Ramsey analyst downgraded the student finance company, saying there may not be as much cash committed to covering unpaid student loans as people think (HOUSTON CHRONICLE 11-26-07)
The loan servicing industry is taking a massive hit. The companies, which repackage loans and sell them to other financial institutions and investors, now find themselves selling risky debt which investors are becoming increasingly reluctant to buy.
The nation’s financial industry is beginning to see a domino affect, which includes banks, loan companies, and agencies that provide loan servicing. Many of the nation’s institutions are already carrying portfolios of now-risky mortgage debt and they are leery of assuming more high-risk loan portfolios.
The loan industry itself is undergoing massive downsizing, as the weight of defaulted loan products drives companies to restructure and slash payrolls nationwide. The industry is bleeding like a stuck pig and the resultant loss of tens of thousands of jobs adds to the national consumer debt burden.